New Ad-Friendly FCC Trumps Old, Rule By Rule

[Editor’s note: This is an opinion piece from lawyers specializing in this field.]

In a major victory for marketers everywhere, a split panel of the U.S. Court of Appeals for the District of Columbia Circuit invalidated the FCC’s Solicited Fax Rule. The FCC created the Solicited Fax Rule in a 2006 order, requiring that fax advertisements sent with a recipient’s prior express invitation or permission contain an opt-out notice requiring specific information.

Companies petitioned the FCC by the dozens seeking a waiver from the Solicited Fax Rule. The FCC granted these petitions, acknowledging the confusion that may have been caused in the marketplace. After years of market confusion and abundant lawsuits by opportunist plaintiffs (and their counsel), a group of class action defendants challenged the Solicited Fax Rule in the D.C. Circuit.

In a concise and sharp opinion, Circuit Court Judge Brett M. Kavanaugh, joined by Judge A. Raymond Randolph, disagreed with the FCC’s position that the TCPA’s requirement that businesses include opt-out notices on unsolicited faxes provides the FCC authority to require that businesses include the same opt-out on solicited advertisements. The panel reasoned that “Congress drew a line in the text of the statute between unsolicited fax advertisements and solicited fax advertisements.”

The majority was unimpressed with the FCC’s argument that prior express permission to receive fax solicitations lasts only until it is revoked, so all fax advertisements must include a means to revoke that permission. As the majority blithely observed: “If you are finding the FCC’s reasoning on this point difficult to follow, you are not alone. We do not get it, either.” While acknowledging that the FCC may reasonably define prior express permission and reasonably provide that a recipient can revoke prior consent, the opinion is unequivocal that “what the FCC may not do under the statute is require opt-out notices on solicited faxes that are sent with prior express invitation or permission.”

The panel was also unpersuaded by the FCC’s resort to public policy, reasoning that “the fact that the agency believes its Solicited Fax Rule is good policy does not change the statute’s text.” The majority further recognized the potential catastrophic damages for faxes sent with permission but lacking the detailed opt-out notice required under the regulations, citing Anda, a seller of generic drugs facing $150 million in liability for sending solicited faxes lacking the requisite opt-out notice and leading the charge challenging the Solicited Fax Rule, as a prime example.

In a starkly contrary view, Judge Cornelia T.L. Pillard’s lengthy dissent embraced the policy rationale provided by the FCC, opining that the “likely result of the court’s decision is to make it harder for recipients to control what comes out of their fax machines.” She disagrees that the FCC was without authority to require opt-out notices on solicited faxes. Having found that the FCC had authority to issue the Solicited Fax Rule, she also opined on an issue not reached by the majority: whether the FCC had authority to issue retroactive waivers of the opt-out notice requirement for solicited faxes. In Judge Pillard’s view, the FCC failed to establish “good cause” for issuing the waivers by overstating the confusion regulated parties experienced from the Solicited Fax Rule and “threw open the door to opportunistic waiver-seeks.” She further opined that the FCC failed to show that the waivers were in the public interest and even went so far as to say that the FCC “eviscerated its own rule via waiver, rather than employing the limited safety valve authorized by this court’s precedents.”

The impact on pending cases may be significant. The decision could be the death knell for pending TCPA class actions involving solicited faxes sent without the detailed opt-out notice required by the regulations. And, the decision might very well pull the rug out from the cottage industry of plaintiff law firms that have been capitalizing on the Solicited Fax Rule. In fact, up to this point, plaintiffs have been successful in making junk fax claims under the TCPA based merely on an improper opt-out notice, which alone was a $500 per-fax minimum penalty. Now plaintiffs will have to focus on whether the fax was solicited.

FCC Chairman Ajit Pai

But, in the immortal words of Yogi Berra, “it ain’t over till it’s over.” The class action plaintiffs may, and likely will, appeal the decision to an en banc panel of the D.C. Circuit or the United States Supreme Court, especially given Judge Pillard’s pointed dissent. As for the FCC, given that FCC Chairman Ajit Pai has already spoken vociferously in favor of the majority’s decision, vowing that “going forward, the commission will strive to follow the law and exercise

only the authority that has been granted to us by Congress,” it seems unlikely that the new FCC under a Trump Administration will support a further appeal. For now, we can probably expect that class action plaintiffs will use an appeal as a means to keep their cottage industry alive.

Nonetheless, the decision allows companies engaging in fax marketing to breathe a (tempered) sigh of relief by removing a basis for liability where the faxes are sent with prior express invitation or permission. Companies are (for now) relieved of the burden of ensuring compliance with the heady regulatory requirements for opt-out notices where such invitation or permission exists. Plaintiffs will now have to hang their hat on the fax being unsolicited, so good recordkeeping is critical so companies can indeed show the fax was solicited.